Could Iraq be poised to follow the United Arab Emirates out of Opec?

Reuters is reporting that Iraqi officials had considered leaving the Opec oil cartel, but are currently planning to remain a member and seek a higher quota under Opec rules.

They report:

Iraq will be compelled to consider all available options if its OPEC quota is not significantly increased, a senior Iraqi oil ministry official told Reuters on Thursday.

Iraq is enduring a critical financial crisis on the back of the Iran war and a significant increase in its OPEC quota is a must and should be treated with utmost seriousness, the source told Reuters.

Two months ago, the UAE rocked Opec by quitting the group after 60 years of membership, amid the biggest supply crisis in history.

Opec members agree fixed production limits, to control the oil price; they control about 80% of the world’s proven oil reserves but produce only 40% of global crude to help keep market prices at a level that can support the petrostate economies.

Oil has been on quite a journey this year.

On 27 February, just before the Iran war started, Brent crude closed at $72.48 a barrel. It surged once the conflict began – hitting $119/barrel several times in March, and then peaking at $126.41 at the end of April.

But it then fell through May and June – as hopes of a peace deal rose.

Asia-Pacific stock markets have jumped today, amid relief that the oil price has fallen to its pre-Iran war levels.

Japan’s Nikkei has surged by 4.6%, while South Korea’s KOSPI is up over 6%.

Jim Reid, market strategist at Deutsche Bank, says:

Markets are in a buoyant mood this morning, with Brent crude oil prices finally back at their pre-conflict levels.

It comes as flows through the strait of Hormuz have continued to ramp up, with the number of vessels getting through at its highest since the conflict started. And more broadly, the oil price decline has eased fears about a stagflationary shock and aggressive rate hikes to deal with any inflation.

Traders are also relieved that chip giant Micron reported a surge in quarterly profits last night, easing fears that the AI boom might falter.

UK firms have been through a torrid decade – first the Brexit vote, then Covid-19, and then the twin energy shocks from the Ukraine and Iranian wars.

And with a new prime minister soon to take office, business leaders are hoping they will resist the temptation to pile costs on business.

Shevaun Haviland, Director General of the British Chambers of Commerce (BCC) will warn today that the next PM – likely to be Andy Burnham - should try to lift business confidence to achieve higher growth, not stifle it.

Haviland will tell the BCC’s Global Annual Conference today that a lack of confidence is hurting the economy, explaining:

“Weak confidence reduces appetite for risk, which reduces investment, which hampers growth, which knocks confidence further.

“And this circular crisis of confidence is now shackling ambition. Blocking the actions needed to invest, innovate and trade.

“And whoever sits in No10, or the Treasury, needs to understand that.

“Businesses can only deliver growth, if the environment they operate in gives them the confidence to act. And that is where political leadership can make all the difference.”

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Fears that the world could soon face an over-supply of oil have pushed crude prices below their levels before the Iran war.

The price of a barrel of Brent crude has fallen as low as $72.24 today, slightly lower than the day before the Iran war began.

Oil prices have been sliding since the US and Iran finally began peace talks, bolstering hopes of a lasting agreement to end the conflict and encouraging more oil tankers to pass through the strait of Hormuz.

According to CNN last night, MarineTraffic data shows vessel traffic in the strait of Hormuz doubled over the previous 24 hours to its highest level since late February.

News that vessels are now transiting the strait of Hormuz with their satellite signals switched on helped push down the oil price, reports Ipek Ozkardeskaya, senior analyst at Swissquote, adding:

A combination of strategic inventory releases, a collapse in demand from top buyer China and a substantial number of tankers quietly leaving the Persian Gulf “dark” had contributed to a small oversupply in some key markets, according to traders interviewed by Bloomberg.

The agenda

• 9am BST onwards: British Chambers of Commerce global annual conference

• 9am BST: ECB’s Bulletin

• 1.30pm BST: US PCE inflation index for May